Resources without taxes
3/8/2012 9:00 PM Thursday
Resources Without Taxes
Our FM is undoubtedly very busy in preparing the budget. The usual tendency for any FM is to raise the income and savings limit marginally. In my opinion, this is a jaded option that all FMs indulge in, which neither helps ordinary taxpayers nor helps the government to mobilise the much-needed resources.
The following are some suggestions to shore up resources without increasing taxes, which are also friendly to all Indians. If the FM follows my suggestion, it will be a win-win situation for both, the taxpayers and the government. What is more, the government will get a cheap source of funding without any grumbling from the taxpayers.
- One cannot understand the logic behind keeping the savings limit at Rs 100000 (now increased to Rs 120000). Instead, this should be linked to the earning capacity of an individual, say up to 30 per cent of the gross income of an individual. For example, an individual with an income of Rs 5 lakh per annum can save up to Rs 1.5 lakh per year, and a person earning Rs 5 crore per annum can save up to Rs 1.5 crore in a year in specified schemes like PPF, PF, LIC etc. This will effectively eliminate wasteful expenditure of top CEOS, who earn several crores in a year.
- 10 per cent of an individual’s income should be allowed for investment in infrastructure projects like power, road, dams etc., in the form of secured bonds with low interest rates. This would work out to Rs 50000 per year for an individual whose income is Rs 500000, Rs 50 lakh per year for those with an income of Rs 5 crore, and so on. As a result of this, much-needed funds for infrastructure projects would be available.
- Another five per cent should be allowed for investment in green projects, like generation of alternative energy in the form of secured bonds with low interest rates. This would be Rs 25000 per year for an individual whose income is Rs 500000, Rs 2.5 lakh per year for an individual whose income is Rs 5000000, and so on. This would result in funds being generated for green projects.
- Thus, an individual can save up to 45 per cent of his/her gross income. Withdrawal at the time of maturity should completely be exempted from Income Tax.
- The balance amount remaining with the individual may be taxed at 10 per cent if it is between Rs 200000-1000000. Beyond this, the rate of tax should be 15 per cent.
- Regarding income from transactions in shares, the present system of long-term gains and short-term gains makes it a real headache for individuals to keep track of all their transactions, and thus, they fall prey to unscrupulous taxmen. It is better if the FM increases the Turnover Tax/Securities Transaction Tax and completely exempts individuals from paying any Income Tax. This could help eliminate any loopholes and would also save investors’ time and the money spent in filing returns through consultants.
If the FM wants to increase the tax on tobacco products let him do so by all means, but I earnestly request him to consider these options too.
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